The focus of management accounting has changed over the years.
Historically, the focus of management accounting was on financial information.
Factory accounting, budgeting and cost accounting were the main activities
performed. Management accountants provided support in areas of planning and
control using financial data. Non-financial data was used only in providing
financial advice.

The old methods of management accounting were
challenged in the 1980’s. Organizations began to incorporate suppliers and
customers into their strategic decisions. Planning and control became important
in a different perspective. Organizations began to reconfigure themselves in
order to support the changes. Cross-functional teams were created and the
workforce became more empowered.

Strategic Resource Management

Strategic resource management emphasizes the relationships
between strategy formation, change management, and resource management. It
provides answers to questions such as: what resources does the firm have and how
can they create new resources, how do current resources support organizational
strategies, and how can resources be used and re-used over time. Strategic
resource management looks for value while trying to eliminate waste. Under a
strategic resource management system, management accountants will be able to
participate in resource-related direction setting, in the design and
implementation of organizational change, and in the development of control
systems and performance measurements.

The challenge of strategic resource management is that
accountants will have to add value as part of the management team along with
inventing approaches and learning new skills.

This challenge arises from the issues of value and time. The
term "value" is described as a shift in customer or shareholder
perceptions. It no longer consists of only financial measures. Management
accountants must now look at non-financial measures such as the value of workers
and technology when making evaluations.

Figure 1 illustrates the strategic resource management
process:

Figure 1. Strategic Resource Management (p. 45).

Knowledge Management in Organizations

Sustaining a competitive advantage is linked to the existence
or creation of core competencies. A core competency is a form of knowledge. When
an organization has the knowledge to perform a task better than other
organizations, it has a core competency. A core competency has many different
forms. A unique work method, a unique mode of communication, and unique physical
possessions can all be considered core competencies.

Australis: A Case Study

In 1991, the Australis Corporation took on an activity-based
costing project to add to a total quality management initiative in the
corporation. The project focused on overhead and non-factory costs. The key
aspect of this project was to increase knowledge of the relationship between
activities and costs in the company.

Phase one focused on cost reconstructions, mainly in the
department head level. It reconstructed costs in terms of activities, processes,
and product groups. This was done using driver analysis. The outcome showed that
a number of low-volume products were undercosted because setup costs were not
being recognized. It also showed other problems such as packaging costs,
maintenance costs, and equipment replacements were not correctly allocated in
certain situations.

Phase two focused on activity-based performance improvements.
This phase looked at activities and performance directly in order to define new
activity/cost relationships. Both non-value and value added activities were
examined.

There were three main outcomes to this project. First, it
provided a process orientation. During the project, it was noticed that there
were different cultures in different parts of the corporation. The ABC portion
showed how structure dominated process in the company. Next, it provided a set
of diagnostic tools for employees. Staff members were given the knowledge to
evaluate their own activities. Third, the project began the process of sharing
knowledge across departments within the company.

In conclusion, management accounting is now being used as a
mechanism for strategic resource management. Together, all types of resources
can be examined and a new type of management through "knowledge" is
created.

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Related summaries:

Chow, C. W., F. J. Deng and J. L. Ho. 2000. The openness of knowledge sharing within organizations: A comparative study of the
United States and The People's Republic of China. Journal of Management
Accounting Research (12): 65-95. (Summary).